TIDMBEG
Begbies Traynor Group PLC
25 October 2018
25 October 2018
469,000 Businesses In 'Significant' Financial Distress
5% Increase compared to Q3 2017, however slowing Corporate
Distress since Q2 2018
The number of UK companies rated as being in 'significant
financial distress' during Q3 2018 has increased by 5% compared to
the same quarter last year, according to the latest Red Flag Alert
research data from Begbies Traynor, the UK's leading independent
insolvency firm.
The research data, which monitors the financial health of UK
companies - shows that during Q3 2018, 469,006 companies across the
UK were in significant financial distress - an increase of almost
21,000 on Q3 2017. However, significant distress has fallen 1%
since Q2 2018 indicating that UK business health may be showing
some signs of stability.
Quarterly financial performance has been lifted by a strong
summer for some sectors, with food & drug retailers down 2%
(Q2: 12,269, Q3: 12,084), construction down 2% (Q2: 60,132, Q3:
59,111), general retail down 2% (Q2: 30,762, Q3: 30,123), printing
and packaging down 2% (Q2: 2,228 , Q3: 2,188) and professional
services down 2% (Q2: 26,497, Q3: 26,066).
However, the research also reveals this improvement in quarterly
performance is not consistent across all sectors, with real estate
up 2% (Q2: 42,748, Q3: 43,505) and hotels & accommodation up 2%
(Q2: 5,076, Q3: 5,196).
Worryingly, significant business distress increased considerably
year-on-year with real estate up 16% (Q3:17: 37,519, Q3:18:
43,505), utilities up 13% (Q3:17: 2,799, Q3:18: 3,153), hotels
& accommodation up 10% (Q3:17: 4,717, Q3:18: 5,196) and
financial services up 9% (Q3:17: 11,018, Q3:18: 12,049).
Julie Palmer, Partner at Begbies Traynor, said:
"The UK's barbeque summer - coupled with major events such as
the World Cup - provided a feel good bubble for the UK economy.
However, the fading of the summer sun has been accompanied by a
reality check as consumers tighten their purse strings, with a 0.8%
drop in retail sales from August to September, which included the
largest decline in food sales since October 2015.
"This change, coupled with falling house prices and higher
inflation across key essentials such as energy and fuel, have made
UK consumers cautious, particularly as economic certainty around
the details of the Brexit deal remain stubbornly elusive.
"While there has been a recent spate of positive company results
- particularly those with a strong online offering - there have
also been a series of very high profile collapses and profit
warnings. While the headlines have focused on the high street,
other "bellwether" sectors such as property and financial services,
as highlighted in these figures, are showing worrying signs of
increasing distress that needs to be addressed if we are to avoid a
spiral towards static economic growth.
"With an early budget on the horizon, businesses will be waiting
to see what measures the Chancellor can implement to arrest this
decline, however the greatest domestic issue remains Brexit
uncertainty which is the biggest elephant in the economic
room."
Ric Traynor, Executive Chairman of Begbies Traynor Group plc,
commented:
"While the year-on-year increase in the number of businesses in
significant financial distress is disappointing, the fall in
distress between Q2 and Q3 2018 is particularly welcome.
"This, combined with strong wage growth, demonstrates that the
widely anticipated economic meltdown ahead of Brexit has yet to
materialise. However both investor and consumer confidence is
fragile. An escalation of the trade war between the US and China
and EU could have a detrimental impact on the UK, particularly
amongst sectors which are heavily reliant on export, such as
automotive and manufacturing.
"Businesses with a strong product offering in growing markets
will always do well, however all businesses need to focus on the
fundamentals - innovation, sales and financial management, as these
will be key to staying ahead of both domestic and international
competition.
"Those businesses that are quick to adapt in changing times will
be the ones that thrive."
- Ends -
For further information, contact:
McCann PR & Social
Ian Stanley / Sara Burgess / Tom Chaplin
Tel: 0121 713 3566 / 07974 266458
Email: Begbies@mccann.com
About Red Flag Alert
Red Flag Alert has been measuring and reporting corporate
financial distress since 2004, and over that time has become an
industry benchmark of the underlying health of companies across
every sector and region of the UK.
Through its unique algorithm, the Red Flag Alert measures
corporate distress signals, drawing on factual legal and financial
data from a wide range of relevant sources, including intelligence
from the UK's leading insolvency business, Begbies Traynor. Please
note that the Red Flag Alert algorithm was refreshed in Q3 2017 to
enhance the risk factors analysed in the data. The reported results
have been backdated to ensure consistency of comparative data.
The release refers to the numbers of companies experiencing
'Significant' problems, which are those with minor CCJs (of less
than GBP5k) filed against them or which have been identified by Red
Flag's proprietary credit risk scoring system which screens
companies for a sustained or marked deterioration in key financial
ratios and indicators including those measuring working capital,
contingent liabilities, retained profits and net worth.
Red Flag Alert is commercially available to all businesses, on
an annual subscription basis, to help them better understand risk
and exposure and help prepare them for the future. Further
information about Red Flag Alert can be found at:
www.redflagalert.com
About Begbies Traynor Group
Begbies Traynor Group plc is a leading business recovery,
financial advisory and property services consultancy, providing
services nationally from a comprehensive network of UK locations
through two complementary operating divisions.
Business recovery and financial advisory services
Begbies Traynor is the UK's leading independent business
recovery practice, handling the largest number of corporate
appointments, principally serving the mid-market and smaller
companies.
BTG Advisory is a boutique practice, providing commercial,
strategic and partner-led advice, offering the broad range of
professional services necessary to provide viable and effective
solutions to businesses.
We provide these services to businesses, professional advisors,
other stakeholders, investors and financial institutions, working
with all the major UK clearing banks.
Property services
Eddisons is a national firm of chartered surveyors, delivering
advisory and transactional services to owners and occupiers of
commercial property, investors and financial institutions. The
division includes Pugh & Co, the largest regional firm of
commercial property auctioneers by number of lots.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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